Two Essays Exploring the Financial Frontier
Open AccessThe first chapter of the dissertation focuses on studying the behavior of Bitcoin investors by analyzing the order flow data obtained from the largest U.S.-based cryptocurrency exchange. The chapter presents results that provide insights into the trading patterns of Bitcoin investors and the factors influencing their decision-making. The findings reveal that investors who place market orders in Bitcoin tend to exhibit a predominantly contrarian behavior. In other words, they tend to buy Bitcoin when prices have fallen and sell when prices have risen. The analysis further demonstrates that larger traders exhibit a stronger contrarian behavior compared to smaller traders. Moreover, the results indicate positive returns associated with contrarian trading, aligning with the liquidity provision theory proposed by Kanial, Saar, and Titman (2008). The chapter also explores other factors that impact the order flow of Bitcoin, such as social media sentiment and attention. The study reveals that smaller investors' trading decisions are influenced by social media sentiment and attention. However, it is observed that the largest investors do not base their trades on these factors. Furthermore, an analysis of investors' market timing skills indicates that larger investors exhibit superior market timing abilities, which is consistent with the profitability of their contrarian trading strategy.The second chapter of the dissertation focuses on examining the factors that influence Environmental, Social, and Governance (ESG) practices of firms, with a specific focus on the role of board diversity in influencing a firm's sustainability efforts. The chapter presents findings that demonstrate that the firm's emission of air pollutants decreases with ethnic and cognitive diversity of board members. To establish causality, instrumental variable analyses are employed, leveraging the exogenous variation in firms' access to nonlocal diverse board members who reside over 150 miles away but within a non-stop flight from the firm's headquarters. The results indicate that the negative correlation between board diversity and air pollutant emissions is causal. In other words, an increase in board diversity leads to a reduction in the emission of air pollutants in subsequent years. Furthermore, the chapter investigates how Research and Development (R&D;) investments serve as a mechanism through which board diversity enhances firms' prosocial behavior, ultimately resulting in reduced air pollutant emissions. The findings suggest that board diversity influences firms to reduce emissions by making more effective R&D; investments.
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Mofakham_gwu_0075A_16447.pdf | 2023-11-14 | Open Access |
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